Question A:
Deteriorating fiscal outlooks have contributed substantially to the recent rise in long-term government bond yields across advanced economies.
Responses
Responses weighted by each expert's confidence
Question B:
A substantial portion of the increase in yields is caused by the increased supply of government bonds, even after controlling for inflation and sovereign default risk.
Responses
Responses weighted by each expert's confidence
Question A Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
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 Viral Acharya |
NYU Stern | Bio/Vote History | ||
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It is coincident with other stretched Western economy government balance sheets also struggling to be rolled over, and also with private sector competition with IG debt being issued by AI hyper-scalers. Convenience yield at the long end is stably eroded since April 2025.
-see background information here |
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 John Campbell |
Harvard | Bio/Vote History | ||
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Historically the relationship between fiscal outlook and bond returns is weak. It may have kicked in recently but it is hard to be sure.
-see background information here |
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 John Cochrane |
Hoover Institution Stanford | Bio/Vote History | ||
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Face it, we don't really know. And which country? The france-germany spread is a default premium. The level of US rates, less clear. Measures of inflation or default premium are not that elevated. The crisis will come but not obviously right now.
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 Douglas Diamond |
Chicago Booth | Bio/Vote History | ||
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 Wenxin Du |
HBS | Bio/Vote History | ||
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 Darrell Duffie |
Stanford | Bio/Vote History | ||
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 Andrea Eisfeldt |
UCLA Anderson | Bio/Vote History | ||
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A positive relationship between deficits and yields is consistent with fiscal theory.
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 Eugene Fama |
Chicago Booth | Bio/Vote History | ||
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 Xavier Gabaix |
Harvard | Bio/Vote History | ||
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 Itay Goldstein |
UPenn Wharton | Bio/Vote History | ||
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 John Graham |
Duke Fuqua | Bio/Vote History | ||
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 Campbell R. Harvey |
Duke Fuqua | Bio/Vote History | ||
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I agree for some countries like France. I disagree for other many other countries such as U.S. and Germany.
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 Harrison Hong |
Columbia | Did Not Answer | Bio/Vote History | |
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 Wei Jiang |
Emory Goizueta | Bio/Vote History | ||
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 Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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Hard to know how that has changed. what has changed is real investment demand from AI and inflation from higher oil prices. would look to those two as more likely to be important for the recent increases.
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 Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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One of several factors
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 Arvind Krishnamurthy |
Stanford GSB | Bio/Vote History | ||
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Its more about markets requiring higher yields to accept more supply than default risk per se. The significant effect is that rates on both public and private debt are up. A second effect is that the convenience yield on public debt is down, pushing up public more.
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 Camelia Kuhnen |
UNC Kenan-Flagler | Bio/Vote History | ||
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 Michelle Lowry |
Drexel LeBow | Bio/Vote History | ||
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 Sydney Ludvigson |
NYU | Bio/Vote History | ||
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 Matteo Maggiori |
Stanford GSB | Bio/Vote History | ||
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 Loretta Mester |
UPenn Wharton | Bio/Vote History | ||
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Fiscal sustainability is a problem in many advanced economies including the US. There is no indication that there is a plan to dealing with the fiscal situation in the US. Growth and productivity is not enough to solve this issue.
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 Tobias Moskowitz |
Yale School of Management | Bio/Vote History | ||
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 Tyler Muir |
UCLA Anderson | Bio/Vote History | ||
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Feels right but I don’t see much support in the data except for France. I'd think fiscal channel should show up in inflation expectations, default risk, long yields rising more than short. Past year in the US: 2yr up more than 10yr, inflation breakevens flat, no action in US CDS
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 Stefan Nagel |
Chicago Booth | Bio/Vote History | ||
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Fiscal solvency concerns should show up in breakeven inflation or sovereign CDS spreads, which is mostly not happening (exception e.g. France).
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 Dimitris Papanikolaou |
Northwestern Kellogg | Bio/Vote History | ||
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Markets have become more sensitive to fiscal conditions now that central banks are not absorbing a significant fraction of the new flow
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 Jonathan Parker |
MIT Sloan | Bio/Vote History | ||
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The statement is true for a few countries, with France being the leading example. But for most developed economies, the increase in interest rates has been an increase in real rates not inflation premia and hasnot been associated with increases in default risk as priced by CDS.
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 Christine Parlour |
Berkeley Haas | Did Not Answer | Bio/Vote History | |
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 Thomas Philippon |
NYU Stern | Bio/Vote History | ||
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 Manju Puri |
Duke Fuqua | Did Not Answer | Bio/Vote History | |
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 Michael R. Roberts |
UPenn Wharton | Bio/Vote History | ||
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Not uniformly across countries
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 Paola Sapienza |
Hoover Institution Stanford | Bio/Vote History | ||
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 Amit Seru |
Stanford GSB | Bio/Vote History | ||
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 Robert Stambaugh |
UPenn Wharton | Bio/Vote History | ||
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 Laura Starks |
UT Austin McCombs | Did Not Answer | Bio/Vote History | |
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 Jeremy Stein |
Harvard | Bio/Vote History | ||
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 Johannes Stroebel |
NYU Stern | Bio/Vote History | ||
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 David Thesmar |
MIT Sloan | Bio/Vote History | ||
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they have contributed (e.g. France), but this is only part of the story. US monetary policy expectations and money moving to equities & AI also explain a big part, potentially the bulk. for instance, german bonds are safe but yields have gone up.
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 Sheridan Titman |
UT Austin McCombs | Bio/Vote History | ||
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 Stijn Van Nieuwerburgh |
Columbia Business School | Bio/Vote History | ||
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At 100% debt/GDP, economy is vulnerable to negative shocks about future primary surpluses. The Iran war, low corp. tax revenues, and slowly increasing costs of entitlement programs have worsened the fiscal outlook.
-see background information here |
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 Nancy Wallace |
Berkeley Haas | Bio/Vote History | ||
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 Toni Whited |
UMich Ross School | Bio/Vote History | ||
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 Haoxiang Zhu |
MIT Sloan | Bio/Vote History | ||
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Question B Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
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Viral Acharya |
NYU Stern | Bio/Vote History | ||
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I find in ongoing work with Michael Fleming, Toomas Laarits and Or Shachar that the supply shocks are aggravating the tilt of intermediaries away from long-term bonds to short-term Tbills, adding to the rate volatility
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John Campbell |
Harvard | Bio/Vote History | ||
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Government bond supply is one factor, but so is private demand for loanable funds (driven in the US by the AI investment boom). The relative importance of these factors is unclear.
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John Cochrane |
Hoover Institution Stanford | Bio/Vote History | ||
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Kind of mechanically, if one sector is borrowing a huge amount more, even if they have good plans to pay it off, interest rates rise.
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Douglas Diamond |
Chicago Booth | Bio/Vote History | ||
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Wenxin Du |
HBS | Bio/Vote History | ||
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Darrell Duffie |
Stanford | Bio/Vote History | ||
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Andrea Eisfeldt |
UCLA Anderson | Bio/Vote History | ||
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It’s possible, and consistent with recent auction phenomena, but it is challenging to disentangle these effects.
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Eugene Fama |
Chicago Booth | Bio/Vote History | ||
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Xavier Gabaix |
Harvard | Bio/Vote History | ||
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Itay Goldstein |
UPenn Wharton | Bio/Vote History | ||
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John Graham |
Duke Fuqua | Bio/Vote History | ||
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Campbell R. Harvey |
Duke Fuqua | Bio/Vote History | ||
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The supply of government bonds is highly predictable. The surge in AI-related and data center bonds was unexpected. Nominal bond yields are up because expected real rates have increased due to higher expected economic growth.
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Harrison Hong |
Columbia | Did Not Answer | Bio/Vote History | |
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Wei Jiang |
Emory Goizueta | Bio/Vote History | ||
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Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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Arvind Krishnamurthy |
Stanford GSB | Bio/Vote History | ||
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Camelia Kuhnen |
UNC Kenan-Flagler | Bio/Vote History | ||
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Michelle Lowry |
Drexel LeBow | Bio/Vote History | ||
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Sydney Ludvigson |
NYU | Bio/Vote History | ||
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Matteo Maggiori |
Stanford GSB | Bio/Vote History | ||
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Loretta Mester |
UPenn Wharton | Bio/Vote History | ||
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Government issuance will need to rise to fund Increased defense and safety net spending, and to cover interest expenses unless the fiscal situation is dealt with.
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Tobias Moskowitz |
Yale School of Management | Bio/Vote History | ||
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Tyler Muir |
UCLA Anderson | Bio/Vote History | ||
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Supply today: far more long-term Treasury debt, Fed no longer absorbing it, ECB and BoJ shrinking holdings. Supply risk ahead: potentially weaker promise of future QE so private investors bear more supply risk (Haddad, Moreira, Muir). Growth due to AI also likely important though
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Stefan Nagel |
Chicago Booth | Bio/Vote History | ||
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Not clear, as we also have an AI-debt and AI-investment boom going on at the same time (that is expected to accelerate in the coming years).
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Dimitris Papanikolaou |
Northwestern Kellogg | Bio/Vote History | ||
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Jonathan Parker |
MIT Sloan | Bio/Vote History | ||
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The primary cause is the U.S. AI-driven investment boom,, then secondly, prospective deficits. Some countries like the U.S. have been reducing primary deficits and shortening the duration of their debt. But higher rates have raised deficits & increased supply, maybe substantially
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Christine Parlour |
Berkeley Haas | Did Not Answer | Bio/Vote History | |
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Thomas Philippon |
NYU Stern | Bio/Vote History | ||
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Manju Puri |
Duke Fuqua | Did Not Answer | Bio/Vote History | |
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Michael R. Roberts |
UPenn Wharton | Bio/Vote History | ||
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Expectations of future supply increases
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Paola Sapienza |
Hoover Institution Stanford | Bio/Vote History | ||
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Amit Seru |
Stanford GSB | Bio/Vote History | ||
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Robert Stambaugh |
UPenn Wharton | Bio/Vote History | ||
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Laura Starks |
UT Austin McCombs | Did Not Answer | Bio/Vote History | |
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Jeremy Stein |
Harvard | Bio/Vote History | ||
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Johannes Stroebel |
NYU Stern | Bio/Vote History | ||
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David Thesmar |
MIT Sloan | Bio/Vote History | ||
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yes, in conjunction with reduced demand to do AI bond issues + attraction of equities
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Sheridan Titman |
UT Austin McCombs | Bio/Vote History | ||
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Stijn Van Nieuwerburgh |
Columbia Business School | Bio/Vote History | ||
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The supply is large, but even more importantly, the buyer composition has changed with fewer foreign and central bank purchases. Price sensitive domestic buyers require higher yields.
-see background information here |
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Nancy Wallace |
Berkeley Haas | Bio/Vote History | ||
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Toni Whited |
UMich Ross School | Bio/Vote History | ||
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Haoxiang Zhu |
MIT Sloan | Bio/Vote History | ||
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